July 9, 2013

Christine Fahlund Chris Fahlund, Ph.D., CFP®, is a senior financial planner and vice president of T. Rowe Price Investment Services.

Retirement can be hard to define for many people who are still actively engaged with their jobs, but figuring out what retirement means to you is worth the effort—and it's a necessary step in planning your financial strategy. Investors who plan ahead are more likely to enjoy a comfortable retirement. They also tend to live more wisely in the moment, according to a recent study by T. Rowe Price. Though the concept of retirement may have changed, the value of knowing what retirement means to you has not.

Retirement Today

Retirement has changed in several significant ways. Consider the following:

Retirement is gradual. The increasingly fluid and portable nature of work has blurred the traditional line between career and retirement. About four in 10 retirees reported that they aren't "fully" retired. And working longer has significant benefits: The extra income, even from part-time work, can help stretch your savings to cover a retirement that could last three decades or longer. Retirement also could mean leaving your income paying job to pursue your passion, whether that's volunteering for a favorite nonprofit or helping to care for your grandchildren.

60 is the new 40. Many preretirees still feel youthful, making it easy to delay or ignore the need for retirement planning. But feeling vigorous is actually a compelling reason to plan and save for retirement—healthy people are likely to live longer, which means longer retirements. Use the time you have to your advantage by starting to save as early as possible.

Baby boomers are caregivers. The busy nature of everyday life—which often includes caring for children and aging parents—can derail preretirees from taking the time to fully plan for their future. But don't be discouraged. There are many viable options to getting your retirement back on track. Keep in mind that if you don't take care of your own needs, you won't be in a position to help the people who depend on you.

Envision Success

Our study revealed that successful retirees share certain attitudes about retirement. Most credit their success to the fact that they have a clear vision for a happy retirement, which includes time spent with family and friends, as well as the ability to help others. Shaping their lives around their passions makes it easy to enjoy their free time. It also keeps retirees motivated to save, even in the face of competing priorities.

Such clarity about goals helps them face the changes ahead, too. Successful retirees tend to seek value and avoid waste: You may decide, for example, that you no longer need a big house or a brand new car. Contented retirees ultimately see the challenges of retirement as opportunities-to try new things and work toward goals they haven't had the time or money to explore before. It can be an exciting new chapter in your life if you plan ahead.